CF10 5BF

Prime City Centre Multi Let Office Investment Executive Summary

• A rare opportunity to acquire a prime multi let office investment in the heart of city centre, within close proximity to Cardiff Central Railway Station. • Cardiff is ’ capital city and the major office and retail hub in the Principality. • Located within the recently established Cardiff Central Enterprise Zone – The only enterprise zone in the UK dedicated to growing and attracting the financial and professional services sectors to the city. • Freehold, “Grade A” office building completed in 2007 and developed to a high specification. • Comprises 59,750 sq ft (5,551 sq m) over 4 storeys with open plan, flexible floor plates and 59 car parking spaces reflecting an excellent car parking ratio of 1:1,013 sq ft. • Fully let to a diverse range of tenants including the established Deloitte LLP, Balfour Beatty Group Limited and ACAS. • Total rent of £1,015,124 per annum which equates to £16.98 per sq ft. • Multi let with a WAULT of 8.03 years to lease expiries and 3.99 Fusion Point 3 years to break options. Development Site • Seeking offers in excess of £11,288,000, which represents an attractive Net Initial Yield of 8.50% and a low Capital Value of £189 per sq ft after deducting purchasers costs of 5.8%.

SUBJECT TO CONTRACT & EXCLUSIVE OF VAT Location

Cardiff, the capital of Wales is a popular tourist destination attracting millions of visitors every year. N

There are numerous attractions including the iconic From J32 , , and the From Cardiff International Sports Village. Its global profile Boulevard de Nantes J29a is set to grow further following Cardiff City Football Newport/Bristol/London Newport Rd Adam St Club’s promotion to the premiership and will be further J29

M4 St Clare enhanced if Cardiff City Council is successful in its bid J30 to host the 2026 Commonwealth Games. Millenium Stadium race Ter A4119 te J29a Bu Cardiff benefits from excellent road links and can be Bridgend J32 accessed from 4 junctions of the M4 motorway (29-33). / A470 Tyndall St Cardiff International Airport is located 12 miles (19km) A48

J33 ClareRd to the south west of and offers Central Link Tresillian Way Lloyd George Ave scheduled flights to a number of European destinations.

Cardiff Central Railway Station provides intercity rail Corporation Rd d A470 R services to London Paddington approximately twice an s A4232 From l l J33 a b hour with a journey time of 2 hours and 3 minutes. A4232 m u D d y R ngwa Clarence Rd emi Cardiff is one of the UK’s premier business locations Cardiff H attracting numerous national and global companies A4232 Bluetown Tunnel including Admiral Insurance, Eversheds, Zurich, Atradius, Legal & General, Deloitte, BT and the BBC.

fusionpoint2 From Cardiff J33 Cardiff has an established retail core which includes a major new shopping centre, St. Davids 2, which was completed in 2009. This new development, together with the original St Davids Shopping Centre, comprises a combined 1.4 million sq ft of retail space, including a 260,000 sq ft John Lewis store. This retail development has elevated Cardiff firmly into the top 10 of the UK’s retail hierarchy and was recently voted 5th in “retail centres best place to thrive”, only just behind Westfield, London (source: Experian). Situation

Fusion Point 2 is situated on Dumballs Road in the heart of the city centre, and the newly formed Cardiff Central Enterprise Zone. The property benefits from excellent road access and is located within close proximity to Cardiff Central Railway Station and bus terminal.

Fusion Point 2 is also within a short walk of the city centre’s other amenities and attractions including the retailing area around Queen Street and the extended St. Davids Shopping Centre.

Fusion Point 2 sits adjacent to Fusion Point, a 60,000 sq ft (5,574 sq m) Grade A office building completed in 2003 occupied by 118 118; and opposite St William House, a 144,000 sq ft (13,378 sq m) Grade A office building completed in 2000 and occupied by . Fusion Point 2 forms part of the greater area, which is established as Cardiff’s prime office location with other occupiers including Zurich, Eversheds, Deloitte, Brewin Dolphin, The AA and ING.

A significant amount of further development is either underway or in the pipeline nearby. Fusion Point 3 office development plot adjoins the subject property while adjacent is a site currently being developed into a new Cardiff campus for the Cardiff and Vale College which will comprise a 160,000 sq ft (14,864 sq m) modern teaching facility ready for occupation in 2015. To the rear is the 5 acre Callaghan Square south side site which has been acquired by and has outline planning consent for a further 500,000 sq ft (46,451 sq m) of commercial development.

Artist impression of the new Cardiff and Vale College Campus Cardiff City Centre Vision

1. Cardiff Central Railway Station Cardiff City Council and Welsh Government have acknowledged that the future growth of the Welsh economy is dependent on a strong and 2. Cardiff Central Bus Terminal vibrant capital city. The new Enterprise Zone is just one of numerous initiatives which form part of a detailed Master Plan for the city 3. Stadium Plaza Leisure Scheme which will vastly improve the infrastructure and boost the economic profile of Cardiff to firmly consolidate its position as one on the major 4. Millennium Stadium regional centres in UK. These initiatives include: 5. Stadium House 6. Cardiff Castle 8 7. City Hall 8. 9 7 9. Capital Tower 6 10. Queen Street Retailing Area 10 5 13 21 11. St Davids 2 Shopping Centre 4 11 12. John Lewis 13. Site of new Admiral Insurance HQ Development 12 3 14. Site of new Capital Quarter Development 2 22 14 15. Phase 1 Callaghan Square 1 15 16. Phase 2 Callaghan Square 17. Callaghan Square South Side Development Site 16 18. St Williams House 20 19. St Patrick’s House 19 18 17 20. 23 21. Motorpoint Arena 22. Wood Street Development Site 23. Fusion Point fusionpoint2 24. Development of the new Cardiff and Vale College Campus 25 Cardiff 25. Fusion point 3 Development Site 24

• Cardiff Central Enterprise Zone - The subject property sits within • Electrification of the main intercity rail line – This would improve • Welsh Governments Acquisition of Cardiff Airport – Welsh the heart of the recently established Cardiff Central Enterprise Cardiff’s connectivity via faster journey times to London with Government have acquired the airport in order to boost its Zone which is centred on the Cardiff Central Railway Station and the work scheduled to be completed by 2018. profile and increase the number of airlines and routes around is the only Enterprise Zone in the UK dedicated to growing and Europe and internationally to further improve Cardiff’s attracting financial and professional services sectors to the city. • Investment in Cardiff Central Railway Station – Plans to create domestic and global connectivity. The Dumballs Road area immediately surrounding the property new civic scaled public squares to the north and south of the is a major focus for the Enterprise Zone. There are plans to station as high quality arrival spaces and “gateways” to the city. • International Convention Centre & Arena – Sites in the city expand the office stock on the northern end of Dumballs Road have been earmarked as a potential location for a new state of and demolish the remaining industrial and residential stock to • Improved connectivity between the city centre and Cardiff Bay – the art convention centre for circa 2000+ delegates and a new the south and replace with various mixed use developments One of the proposals is for a new tram link along Dumballs Road. arena with a capacity of 10,000+. split into 3 or 4 different pockets which will open up the valuable waterside land fronting on to the River Taff. The Further details of these plans and initiatives are available on implementation of these plans will further enchance the micro request. location surrounding the subject property. Description

Fusion Point 2 was completed in 2007 and comprises a new 59,750 sq ft (5,551 sq m), 4 storey, high specification “Grade A” office building. It benefits from full height glazing to the front el- evation and a 2 storey atrium above the ground floor reception area. The side and rear elevations are part brick, part composite clad and part glazed with a flat roof.

The office and building specification is as follows:

• Air conditioning • Fully accessible raised floors - 250mm void • Suspended ceiling with recessed lighting • Floor to ceiling height of 2.90m • Large, flexible, open plan floor plates • BREEAM rating VERY GOOD • 2 x 10 persons passenger lifts • Males, female and disabled WC’s on every floor • Disabled access and facilities • Secure car parking areas • 24 hour access • Manned security / reception • 59 secure undercroft car parking spaces reflecting an excellent ratio of 1:1,013 sq ft Accommodation

The property has been measured in accordance with the RICS Code of Measuring Practice (6th Edition) and provides the following net internal areas:

Demise Description Sq m Sq ft

Ground Floor Office 1,135.2 12,220 Ground Floor Lobby 4.2 45 First Floor Office Suite 1 259.9 2,798 First Floor Office Suite 2 1,186.1 12,767 Second Floor Office 1,489.4 16,032 Third Floor Office Suite 1 Front 556.3 5,988 Third Floor Office Suite 2 Rear 919.7 9,900 Total 5,550.8 59,750

Floor Plate Fusion Point 3 Site

Plans for indicative purposes only Tenancy

Demise Total Area Total Area Tenant Term Lease Start Expiry Date WAULT Break Option WAULT Current Rent Current Rent (sq ft) (sq m) (Expiry) (Breaks) (per annum) (per sq ft)

Ground floor lobby 45 4 Balfour Beatty Group Ltd 10 01/07/2007 30/06/2017 3.74 *30/06/2014 3.74 £832 £18.49

Ground Floor 12,220 1,135 Balfour Beatty Group Ltd 10 01/07/2007 30/06/2017 3.74 *30/06/2014 3.74 £226,070 £18.50

First Floor Suite 1 2,798 260 Involegal LLP 15 05/01/2011 04/01/2026 12.26 14/07/2018 4.78 £46,167 £16.50 First Floor Suite 2 12,767 1,186 Involegal LLP 5 17/12/2012 14/07/2018 4.78 none 4.78 £207,190 £16.23 Second Floor 16,032 1,490 Involegal LLP 15 05/01/2011 04/01/2026 12.26 14/07/2018 4.78 £264,528 £16.50 Third floor suite 1 5,988 556 The Secretary of State for 10 01/12/2009 30/11/2019 6.16 30/11/2015 2.16 £107,185 £17.90 Communities (ACAS)

Third Floor suite 2 9,900 920 Deloitte LLP 13 12/10/2011 01/01/2025 11.25 11/10/2016 3.02 £163,152 £16.48 Total 59,750 5551 8.03 3.99 £1,015,124 * Break notice period has now elapsed

Tenancy The property is fully let and multi tenanted on full repairing and insuring terms as set out in the tenancy schedule above. The total rent is £1,015,124 per annum, reflecting an average rent of £16.98 per sq ft, with a eightedW Average Unexpired Lease Term (WAULT) to lease expi- ries of 8.03 years and 3.99 years to break options. The vendor will top up any rent free incentives remaining on the current leases. Service and Estates Charge The service and estates charge for Fusion Point 2 in 2012/2013 totalled £214,751.75 reflecting £3.59 per sq ft. The budget for 2013/2014 is £221,172 reflecting £3.72 per sq ft. Tenure Freehold, subject to the existing leases.

03/10/2013 Covenant Profile

Deloitte LLP Involegal LLP “Deloitte” is regarded as one of the “Big 4” international accountancy and professional services Involegal is a law firm specialising in volume legal outsource solutions to the banking, insurance firms. It’s the brand under which tens of thousands of dedicated professionals in independent firms and corporate sectors. Involegal is the corporate brand for Involegal LLP and is a throughout the world collaborate to provide audit, consulting, financial advisory, risk management, and business wholly owned by the equity partners of Hugh James, a top 100 UK law firm. tax services to selected clients. These firms are members of Deloitte Touche Tohmatsu Limited (DTTL), and Deloitte LLP is the United Kingdom member firm of DTTL. Hugh James Involegal LLP have a Dun & Bradstreet rating of H1, representing a minimum risk of business failure, but as a relatively new company there is limited financial information available. Deloitte LLP have a Dun & Bradstreet rating of N1 and showed the following published accounts for the For further information please see their website http://www.involegal.com. last 3 years:

12 Months Ending 31 May 2012 31 May 2011 31 May 2010

Turnover £2,329 million £2,098 million £1,953 million Pre-tax Profits £406 million £409 million £543 million Tangible fixed assets £418 million £466 million £573 million

For further information please see their website www.deloitte.com.

Secretary of State for Communities and Local Government This space is occupied by the Advisory Conciliation and Arbitration Service (ACAS) Wales headquarters. ACAS was founded in 1975 and is largely funded by the Department for Business, Balfour Beatty Group Limited Innovation and Skills, although ACAS is a non-departmental body, governed by an independent Balfour Beatty was founded in 1909 and is now an integrated infrastructure services group, with Council. ACAS aim to improve organisations and working life through better employment operations in over 80 countries and circa 50,000 employees. Together with their partners and clients relations. They help with employment relations by supplying up-to-date information, they fund, design, deliver, operate and maintain infrastructure around the globe. independent advice and high quality training, and working with employers and employees to solve problems and improve performance. Balfour Beatty Group Limited are assigning this lease to Balfour Beatty Workplace Limited with an AGA from Group. Balfour Beatty Workplace Limited occupy this Building. Balfour Beatty Group Limited have As a Government tenant they provide an undoubted covenant. For further information please a Dun & Bradstreet rating of 5A1, the highest achievable rating, and showed the following published see their website www.acas.org.uk. accounts for the last 3 years: 12 Months Ending 31 December 2011 31 December 2010 31 December 2009

Turnover £2,999 million £2,995 million £3,266 million Pre-tax Profits £91.8 million £50.5 million £92.3 million Tangible fixed assets £782 million £742 million £683 million

For further information please see their website www.balfourbeatty.com. Cardiff & Regional Investment Market

Cardiff Investment Market As the capital of Wales, Cardiff is regarded as one of the major centres in the UK and is the focus for investor demand for offices in Wales. This has led to a number of high profile investment transactions in recent years, with purchasers including both UK based and International investors. Transactions in the last 2 years include the sale of 5 Callaghan Square to Credit Suisse, the sale of 1 Callaghan Square to Capital Trust, Union Investments funding of the new Admiral pre-let offices and Cordea Savills acquisition of .

The regional investment market in general has seen a recent surge in demand by investors who view it as good value compared to the over heated Central London and South East markets. In a stock starved market an increasing weight of money is chasing modern, well located offices situated in core locations in the major regional centres.

Investment transactions

Unexpired Tenant Building Price (£m) Yield (%) Lease Term Purchaser Vendor Date (years) Toronto Square, Toronto 29.00 7.00 4.30 Multi-let M&G Real Estate Highcross Aug 2013 Street, Leeds

84 Colmore Row, 11.00 5.82 11.50 Mills & Private investors Bank of Ireland Aug 2013 Birmingham Reeve

1 Brindley Place, 30.00 6.29 11.00 Deutsche Trinova Real Estate British Airways Pension July 2013 Birmingham Bank Fund

Barhaus, Manchester 16.25 7.60 5.00 Multi let Orchard Street Blackrock May 2013

Admiral Headquarters, 58.60 5.85 25.00 Admiral Union Investments Stoford Developments Mar 2012 Cardiff

1 Callaghan Square, 25.50 6.50 10.3 Eversheds Capital Trust Cordea Savills Feb 2012 Cardiff LLP

5 Callaghan Square, 14.27 7.00 8.90 Multi-let Credit Suisse MEPC Oct 2011 Cardiff Cardiff Office Market

Cardiff Office Market Cardiff is the principal office market within Wales, and one of the major regional centres in the UK, with an estimated office stock of approximately 10m sq ft. Cardiff’s office market is divided into three main core locations; the city centre, Cardiff Bay and the business parks situated to the north of the city along the M4 Corridor.

In recent years the prime city centre office core has located to just south of Cardiff Central Railway Station, in and around Callaghan Square and the northern end of Dumballs oad.R Recent development here has delivered prime Grade A buildings with large floor plates. These offices together with Cardiff’s status as a cosmopolitan capital city with excellent communications and a large skilled workforce, has attracted major occupiers including Deloitte, Centrica, Eversheds, AIB, ING, the AA, Lloyds Banking Group, Balfour Beatty and Zurich.

Since the downturn speculative office construction activity has been limited, and the only new build speculative scheme currently being built is the 78,000 sq ft No 1 Capital Quarter, which is due for completion in 2014. Construction is also underway on a new headquarters building for Admiral Insurance, totalling 206,000 sq ft at a site to the rear of St David’s 2 shopping centre. This will be 11 storeys high and represents the largest ever single office letting in Wales.

Against this background, Cardiff was the only major regional UK office market to see growth in prime headline rents during the downturn with rents rising in 2009, to £21.00 per sq ft and £22.00 per sq ft in 2012. However, it is important to note the rental discount to nearby Bristol where prime city rents are at £27.50 per sq ft and Birmingham at £28.50 per sq ft. This is a significant discount and should be a key driver in attracting new occupiers to Cardiff, Wales’ capital city.

Current Grade A supply is at an historically low level in the city centre which contributed to a relatively low take-up in 2012 of 375,000 sq ft compared to 640,000 sq ft (including the 206,000 sq ft Admiral pre let) in 2011, 437,000 sq ft in 2010 and 380,000 sq ft in 2009. The long term average annual take up is 450,000 sq ft.

With a decreasing supply of Grade A space there is emerging evidence showing a decrease in the level of incentives required to secure Grade A lettings. This trend along with the current initiatives being undertaken to improve the economic profile and infrastructure in the city centre should drive rental growth in Cardiff. Investment Considerations

• Cardiff is the capital city of Wales and one of the major regional centres in the UK. • Freehold. • Located in the heart of the city centre within close proximity to Cardiff Central Railway Station, the St David’s 2 Shopping Centre and Queen Street retailing areas. • The property was developed in 2007 to a high specification and benefits from open plan, flexible floor plates. • Excellent car parking ratio of 1:1,013 sq ft. • Current rent of £1,015,124 per annum reflects a rate of £16.98 per sq ft which looks low when compared to the prime headline rent for Cardiff of £22.00 per sq ft and the £18.50 per sq ft, which has been achieved at the property. • WAULT of 8.03 years to lease expires, and 3.99 years to break options, provides the opportunity for proactive asset management. • Strong occupational story with Involegal having recently taken more space and Balfour Beatty ignoring their recent break option. • Current shortage of Grade A space in Cardiff city centre should drive rental growth. • Prime headline rent of £22.00 per sq ft in Cardiff offers a discount to other major regional centres. • Located in the recently established Cardiff Central Enterprise Zone which should have a positive impact on the future letting prospects of the building. • Significant infrastructure improvements currently underway or in the pipeline which will enhance Cardiff’s domestic and international profile and connectivity, creating a positive impact on the economy and office market in Cardiff and the region. • In a market characterised by a shortage of prime office investments this represents a good opportunity to acquire a modern GradeA office building in a major regional centre, offering opportunities for proactive asset management. • Modest lot size of £11,288,000 reflecting an attractive Net InitialYield of 8.50% and a low capital value of £189 per sq ft, after deducting purchasers costs at 5.8%.

Capital Allowances The vendor has not claimed any capital allowances. The benefit of any unclaimed capital allowances could be made available to the purchaser.

VAT The property has been elected for VAT and VAT is payable on the purchase price. However it is envisaged the sale will be treated as a Transfer of a Going Concern (TOGC) assuming the purchaser is registered and will elect to tax the property.

Proposal We are instructed to seek offers in excess of £11,288,000 (Eleven Million Two Hundred and Eighty Eight Thousand Pounds), Subject to Contract and Exclusive of VAT for the freehold interest. This represents an attractive Net Initial Yield of 8.50% and a Capital Value of £189 per sq ft, after deducting purchasers costs at 5.8%. fusionpoint2 Cardiff

Contact

For further information or to arrange an inspection please contact the following:

Rob Jones Tim Smither Tel: 029 2044 0128 Tel: 020 7861 1227 Email: [email protected] Email: [email protected] Gareth Lloyd Charles Hobart Tel: 029 2044 0141 Tel : 020 7861 1212 Email: [email protected] Email : [email protected]

Important Notice Particulars: These particulars are not an offer or contract, nor part of one. You should not rely on state- ments by Knight Frank LLP in the particulars or by word of mouth or in writing (“information”) as being factually accurate about the property, its condition or its value. Neither Knight Frank LLP nor any joint agent has any authority to make any representations about the property, and accordingly any information given is entirely without responsibility on the part of the agents, seller(s) or lessor(s).

Photos etc: The photographs show only certain parts of the property as they appeared at the time they were taken. Areas, measurements and distances given are approximate only.

Regulations etc: Any reference to alterations to, or use of, any part of the property does not mean that any necessary planning, building regulations or other consent has been obtained. A buyer or lessee must find out by inspection or in other ways that these matters have been properly dealt with and that all information is correct.

VAT: The VAT position relating to the property may change without notice. Knight Frank LLP is a limited liability partnership registered in England with registered number OC305934. Our registered office is 55 Baker Street, London W1U 8AN, where you may look at a list of members’ names.

October 2013